End of Employment Procedures & Guidelines in Croatia
Permanent employment contract termination requires a justified reason, except in situations of gross employee misconduct. There are multiple ways to terminate employment fairly:
- By mutual agreement — parties are free to decide on the termination terms
- Employee retirement — when the employee turns 65
- Business reasons — due to economic, technological, or organizational reasons
- Personal reasons — if the employee is not capable of fulfilling duties
- Misconduct — violation of the employment obligations
- During the probationary period
- The expiry of the contract term
Employers must present employees with a written notice of dismissal, explaining the reasons for the employment termination, and respect the appropriate notice, which varies from two weeks to three months, depending on the length of service. In cases of misconduct, the employer must first warn the employee and give them a chance to defend themselves.
Upon termination, employers must de-register employees with the Tax and Insurance Authorities and pay employees any salaries and severance that are due and for unused holidays. Employers can choose to pay in lieu of having the employee serve their notice.
If the court finds that an employer’s termination was invalid, it may order the employer to reinstate the employee or to compensate the employee for damages suffered, which ranges from three to eight monthly salaries.
Extraordinary termination can occur in instances of a grave employment violation by either employee or employer where employment continuation is not possible. This type of termination is effective immediately and must be served within 15 days of discovering the grounds to be valid. Court practice plays a decisive role in assessing whether behaviour, an act, or an occurrence should be considered a justiﬁed cause for ordinary termination or for extraordinary termination.
Although the justified grounds are not defined by law, previous decisions by the court can be used as a source for typical violations, for example:
- Misuse of sick leave
- Performance of competing tasks during employment
- Loss of the licence required for the performance of a certain type of work
Before proceeding with the termination of an employee in situations of misconduct, employers must follow strict guidelines:
- Employers must first issue a written warning to the employee about the breach of obligation. The warning serves as a note that if the breach continues, the employment will be ceased.
- Employees must be allowed to explain themselves.
- If the situation persists, employers proceed with the employment termination. They must do it in writing, along with the explanation for the dismissal.
Non-compliance with these requirements may result in the termination being null and void.
Unlike employers, employees can end the employment contract without specifying a reason for doing so. However, employees are required to serve their notice period, or employers can sue them for breaching their contract. Employees can try to negotiate waiving or shortening the notice period with their employers. Notice in case of resignation cannot exceed one month, provided there is a justiﬁed reason for that term of notice.
Collective redundancies happen when employers dismiss at least 20 employees in three months, provided that at least 5 of the employees are dismissed due to business reasons. For the redundancy to be valid, employers must first consult with the works council. If not applicable, they must then turn to the trade union leader, avoid redundancies, or reduce the number of employees impacted and create a redundancy social plan. Employees are entitled to challenge dismissals before the competent court.
Employers must provide the works council or trade union with the reasons for the redundancy, the number and categories of employees being made redundant, and the amounts and the methods for calculating severance pay.
If the employer fails to follow the guidelines, dismissals are null and void. In addition, the authorities can impose a fine upon the employer that can amount to HRK 60,000.
The length of the notice period depends on years with the company and the employee’s age, as follows:
- Less than 1 year of service: 2 weeks
- 1 year of service: 4 weeks
- 2 years of service: 6 weeks
- 5 years of service: 8 weeks
- 10 years of service: 10 weeks
- 20 or more years of service: 12 weeks
Moreover, employees over the age of 50 receive an additional two weeks’ notice; employees over the age of 55 receive a four weeks’ notice. The notice period cannot exceed four months.
Employees are entitled to being absent from work for at least four hours a week to seek a new job.
The notice period begins when the notice is served and cannot run during a pregnancy/maternity/parental/adoption leave, and leave of pregnant or breastfeeding worker; work with shortened hours; sick leave due to work injury; or service in national defence forces.
Severance pay varies based on the duration of employment and requires at least two years of service. For every year of work, employees are entitled to a minimum of 1/3 of their average monthly salary in the last three months before termination, capped at six months of salary. Employees who are dismissed (except in cases of gross misconduct) or who retire are entitled to severance pay.
Employee termination protection
Employees who fall under certain categories enjoy protection against dismissal, as listed here.
The Croatian government provides unemployment support to those who worked for at least nine months within the past two years and had their job terminated (cannot be termination at fault or voluntary). The benefit’s duration depends on the length of employment, ranging from 90 to 450 days.
For the first 90 days of unemployment, the benefit amounts to 60% of the employee’s gross salary (average of the last three months); for the remaining period, it is 30%.